Equitable Estoppel (LAWS2381)

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This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 392-413 [4.132]-[1.144].

Introduction

Note: this article deals with the merging of estoppel doctrines into equitable estoppel. The history and reasons behind this are dealt with in the LAWS1150 - Principles of Private Law topic, Estoppel. It is highly recommended to quickly read some of that page before reading this.

Equitable estoppel used to be split up into different forms (eg, promissory estoppel dealt with in Principles of Private Law and Proprietary Estoppel). These were all merged into 'equitable estoppel' in the prolific case Waltons Stores (Interstate) Ltd v Maher:

  • Considering both proprietary and promissory estoppel are based the unconscionability of encouraging an assumption and that departing from it to the detriment of another, they are now merged.
  • Estpoppel is based on unconscionability and it must be proved.
  • When is conduct unconscionable? when an assumption was created, and, because of reasonable reliance on that assumption, the relying party has suffered a detriment (eg, by entering a contract, by not entering a contract etc).

These issues were also discussed in Austotel v Franklins Self-Serve:

  • Facts: Austotel was consturcting a supermarket as per Franklin's instructions, but they still couldn't agree on the price even when it was underway. Austotel finally decided to lease it to someone else, and Franklins suffered a detriment because they passed up other opportunities meanwhile.
  • Held: equitable estoppel is less likely to operate in a purely commercial transaction, where both parties are two well-resourced commercial entities. This was a case of hard-headed business decisions, and the court should not intervene (ie, Franklin lost out because of their business decision not to compromise).

[1]Despite the decision in Austotel against equitable estoppel in commercial situations, the court showed in S & E Promotions v Tobin Brothers that it may still operate in some commercial contexts (it did not address the issue directly or set any principles). Some other quick examples of equitable estoppel are as follows:

  • In Angelopoulos v Sabatino,[2] a plaintiff who made improvements to a hotel, while negotiating for a lease, was entitled to restitution for the value of his work.
  • In Blazeley v Whiley,[3] W moved onto B’s property and, based on B’s statements, expected to purchase. W paid instalments on a bank loan and paid B for ‘rent’. The court held there was no contract, but gave an equitable remedy.
  • In Tavita v Sovereign State of New Guinea,[4] a landlord made oral representations that surrender of a lease would be accepted in certain circumstances, but it was impossible at law. The court nonetheless estopped the landlord from denying that the lease had ended.

Remedies to Equitable Estoppel

[5] The remedies of equitable estoppel were discussed in the prolific case Commonwealth v Verwayen:[6]

  • Traditionally, the remedies of estoppel were aimed at making good of the representation ('estopping' the party from departing from the promise).
  • However, equitable estoppel is aimed simply at avoiding the detriment, in whatever way.
  • As mentioned previously, the minimum is done in order to achieve fairness (minimal detriment).

The Problem with Minimal Detriment

[7] The concept of minimal detriment has been mentioned a couple of time before but not in that name - it is the principle that, when applying an equitable remedy, the court should apply the minimal remedy necessary to achieve fairness or to avoid detriment.[8]

  • This principles arises because, whilst the notion of equitable estoppel rests on unconscionablility, it would sometimes be unconscionable to order specific performance or such big equitable remedies in the scenario.
    • For example, where a person told another that he can have his million dollar property, and the person expends a few hundred dollars fencing it.
    • Clearly, whilst the action of the first person was unconscionable and it brought about loss to the other, it would be even more unconscionable to compensate the expenditure of a few hundred dollars with a million dollar property.
  • In Verwayen, Deane J correctly noted that equity is a tool of flexibility, and it would defeat its purpose if it were used to become an instrument of ‘injustice and oppression’. Whilst the 'normal' remedy of estoppel is to 'estopp' rather than to provide compensation, some cases call for the operation of the minimum of equity idea (in the form of equitable compensation etc).
  • Interestingly though, Deane J still noted that 'estopping' is still the normal

These issues were discussed in Commonwealth v Clark:[9]

  • The court estopped the Commonwealth from resiling on the agreement, because it was deemed the normal function and the best possible way to avoid a detriment (which Verwayen identify as the role of equitable estoppel).
  • In doing so, the court refused to define ‘minimum equity’.

The principle of minimal detriment was applied in Yeoman’s Row Management v Cobbe:[10]

  • Facts: A property developed was encouraged to secure planning permission (at great personal expense) on the basis of an expectation induced by the landowner that he would be granted an interest in the property.
  • Held: the property developer was entitled to half the increase in value of the land attributable to the grant of a permission.

Finally, these issues, and in particular Deanje J's discussion and the discretion of the court to mold a suitable form of equitable relief, were discussed in Giumelli v Giumelli:[11]

  • Facts: through a familial arrangement, Robert Giumelli was alloted a quarter share in the family land to build a house. The family did not get on well, and Robert was refused his land. He sued in estoppel, arguing that he acted to his detriment in not going out into the real world, staying on the farm and performing services for his parents.
  • Held: Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy, which falls short of the imposition of a trust.[12]
    • In this case, the family claimed that the Full Court should not have granted relief going beyond the reversal of the detriment suffered, relying on Verwayen. However, the court here said that sometimes the remedy is calculated according to the expectation of the party and not just the detriment suffered. The court left this fairly open, and said that different scenarios require different remedies.

End

This is the end of this topic. Click here to go back to the main subject page for Property, Equity and Trusts 1.

References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. Property Textbook, pp. 403-4 [4.135-4.136]
  2. (1995) 65 SASR 1.
  3. (1995) 5 Tas SR 254.
  4. (1994) 34 NSWLR 691.
  5. Property Textbook, pp. 404-7 [4.137-4.139].
  6. (1990) 170 CLR 394; 95 ALR 321; C/B p. 404.
  7. Property Textbook, pp. 407-13 [4.140-4.144].
  8. Crabb v Arun District Council (1976) Ch 197.
  9. [1994] 2 VR 333.
  10. [2006] EWCA Civ 1139.
  11. (1999) 196 CLR 101.
  12. Bathurst City Council v PWC Properties (1998) 72 ALJR 1470, 1479.
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